Prepaid Cards- An Overview
Washington DC, September 16, 2009
Harish Natarajan
Payment Systems Development Group
The World Bank
Payment Systems and Remittances: Services
Help develop sound and efficient payment, remittance
and Securities Settlement systems, to:
1. Strengthen Financial Stability
2. Support Access to Finance
Stocktaking &
Policy Advice
Implementation
Support
•Vision & Strategy
•Legal Framework
•Large-Value Systems
•Retail Payment Systems
•Government Payments
•Remittances
•Securities Settlement
•Oversight & Cooperation
Financing: WB loans-grants, fee-based and other TA, Regional Initiatives,
FSAPs, support to FIRST-funded Initiatives, Others
2
In the retail payment area, the PSDG supports:
•Creation of comprehensive retail payment system strategies
•Implementation of an efficient clearing and settlement
infrastructure for ALL retail payments
•Efforts to improve the efficiency of the market for international
remittances, through the implementation of the WB-BIS General
Principles for International Remittances Services
•Reforms of the legal and regulatory framework
•Inclusion of the public sector in the retail space to enhance the
efficiency of government payments
•Creation of an effective payment system oversight function and
an inclusive cooperative framework
Prepaid Cards - Characteristics
•“Pay Before”
•Usually Magnetic Stripe based; Value resides at host
•No prior banking relationship
•Usage at ATM, POS and internet
•Re-loadable
•Open Loop Vs Proprietary
•Variants :
•Chip variant: To address infrastructure constraints
•Value stored on Card (Chip Card)
•Authentication using PIN/Biometric
•Re-Load and Cash-out at “agents”
•Virtual: Accessed through mobile phone
Prepaid cards- Process
•Customer
•3
d
•4 •Customer
Service
•Issuance/
•5
Load
•Account set-up &
•Prepaid
settlement, MIS
host
•Inventory
•Authorization. &
Settlement
•Re-ordering
check, MIS
•2
•Distribution
•Usage
•1
•Production
Prepaid Cards
•Mechanism to address varied needs:
Customer
Funded
Corporate
Funded
Government
funded
•Travel
•Gift
•Teen/Youth
•Student
•Travel
•Expenses
•Fleet
•Medical/Meals
•Purchases
•Rewards
•Payroll
•Benefits Transfer
•Relief distribution
•Expenses
•Purchases
•Payroll
Prepaid Cards – A better alternative
Government
Citizen
•Reduce cost
•Easy to administer
•Reduce wastage and fraud
•Enforce targeted usage
•Convenient
•Cost effective
•Control
•“Stigma-Free”
Prepaid Cards – Success stories
•Delivery of US Social security benefits- Direct Express
•Delivery of Italian social security benefits- Poste Italiane
•American Red Cross Disaster Relief
•Russian Pension disbursement – Muscovite Card
•Employee Benefits- Visa Vale
•30 US states deliver child support, unemployment benefits
Implementation considerations
•One Card Vs Multiple cards
•Open loop / Closed Loop
•Access Mechanism: Magnetic Stripe / Chip
•Banking Partner
•Enrollment procedure
•Policies
•Economics
Retail payment systems and instruments: PSDG
key resources
Retail Payment Instruments and Systems: Outcomes of the
“World Bank Global Payment System Survey 2008” & CirasinoGarcia “Measuring Payment System Development”
“Balancing Cooperation and Competition in Retail Payment
Systems”: A World Bank study coordinated by Mario
Guadamillas, which includes a framework for a reform agenda
and guidelines for proper cooperation and competition
Guidance Note for the Implementation of the GPs for
International Remittance Services (upcoming)
Guidance Note for the proper inclusion of Government
Payments in the NPS (upcoming)
Retail payment system strategy for the NPS (upcoming)